Mark Lamb | Wednesday, 28 January 2009

The Year of the Ox

Weekly international investment round up to 27 January 2009

• While speculation is rife about STMicroelectronics, all exporters remain under pressure

• China enters their New Year and focuses upon stimulating internal demand

With four out of the world’s five largest economies in recession maybe it shouldn’t come as any surprise when the future of our country’s largest private employer and major exporter is caught up in speculation.
More news about STMicroelectronics future plans may become clearer today following their expected announcement concerning their set of full year results for 2008 however, at the beginning of this week equity broker and research company Exane BNP Paribas upgraded STMicroelectronics, Europe’s largest semiconductor maker, from ‘neutral’ to ‘outperform’ based upon the company’s solid balance sheet, its strengthening position within the wireless sector and, in their view, their ‘likelihood of restructuring.’
While this kind of speculation is nothing to celebrate for any of ST’s concerned Maltese workforce one of the company’s most important future markets and the only top five world economy not currently in recession, welcomed in their New Year this week.
China, like other top exporting nations such as Germany and Japan has suffered economically amid the global slowdown and has seen its Gross Domestic Product decrease in 2008 as its economy cooled to its slowest pace in 7 years. According to their National Bureau of Statistics, exports account for around a third of their GDP and 2008’s 9 per cent growth rate was their lowest since 2001 when 8.3 per cent was recorded. Last year was also the first time Chinese GDP fell into single-digits since 2003. From the world’s largest exporting countries to its smallest unfortunately, there seems little escape from this economic storm.
As their demand for materials, parts and services fall a slowing Chinese economy will also have a knock-on effect to their surrounding region. Examples of those countries in Asia who could be among the biggest loses are Taiwan, which shipped over 35 per cent of its exports to China last year, South Korea who saw a quarter of all its exports head towards the Chinese markets together with just under 20 per cent of Japan’s.
As the Chinese leave their ‘Year of the Rat’ there is little doubt that it certainly lived up to all of its positive and negative connotations. There, the rat is associated with wealth and aggression which were on display at their hugely successful and expensive hosting of the summer Olympics but also with death and pestilence as sadly experienced in last years earthquake which took an estimated 90,000 victims.
The new ‘Year of the Ox’ is much less extreme and is positively associated with hard work and patience while toiling methodically and with fortitude to achieve prosperity. Certainly attributes that most, particularly the new President of America who was born in a previous Year of the Ox, will need to display this year.
Unlike most other export driven countries China has the benefit of huge reserves. It is the largest foreign owner of US Treasuries and has an estimated $1.95 trillion dollars of currency reserves including tight control over its banks and has recently unveiled a 4 trillion yaun ($585 billion) stimulus package targeting huge internal infrastructure projects.
With all exporters under pressure it is those economies which can stimulate domestic demand and employment who will surely weather this storm the best.

This article does not intend to give investment advice and its contents should not be construed as such. Information in this article has been obtained from various public sources and is given by way of information only. Readers are always encouraged to seek financial advice before making any investment decision.


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China’s semiconductor market to plummet

Texas Instruments cuts 3400 jobs

The Year of the Ox

A flat picture at the local market



28 January 2009

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